From marketing plan to revenue plan (with Chris Walker, CEO at Refine Labs)

It's time to rethink marketing planning. It needs to factor in revenue and not drown sales in dead-end leads.

Together with Chris Walker, we talked about the problems with planning and how to apply a business mindset to marketing planning.

• (00:00) - Introduction
• (04:07) - Planning in reverse
• (05:34) - The first step - where do you capture demand?
• (07:50) - Second step - Creating net new demand
• (09:44) - Serial planning vs overall view
• (14:06) - The hidden cost of waste
• (15:40) - What $42 million in spend teaches us
• (17:40) - Why we're still inefficient with leads
• (23:33) - Optimal resource allocation
• (28:13) - Growth goals drive wrong behaviours
• (32:36) - What do you do about the delta?
• (37:14) - RevOps is perfectly positioned

You can find Chris on LinkedIn or checkout Refine Labs here.

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

Guest

Chris Walker

Founder @ ENCODED

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

[00:00:00] Toni: Hey everyone, this is Tony Holbein. You are listening to a special episode of the Revenue Formula, and it is special because we're having a guest here. It is Chris Walker. We are going to talk about marketing planning, how to think about it, what to do and how to implement it going forward.
[00:00:20] Enjoy.
[00:00:26] Okay. Michael. So funny thing. I've not funny thing. Usually when we record with guests at this late hour, although it's not too bad today, I tend to drink a Red Bull. Yep, because the kids just aren't sleeping and I'm not sleeping this time.
[00:00:45] It's the guests so exciting that you didn't need to drink a red bull No, no, the kids are sleeping so I can sleep. That's amazing and What I'm really excited about today is actually usually you're zinging Marketing and by default me a little bit. So I wanted to stack the deck A little bit in my favor and get, you know, someone in my corner, some support, some support.
[00:01:08] And I could think of no one other than other, I could think of no one better than, uh, Chris Walker. And fortunately, uh, he was willing to join us. So welcome Chris, thanks so much for joining.
[00:01:17] Chris: Awesome to be here. Looking forward to diving in here.
[00:01:20] Mikkel: Perfect. Chris is on the show. Fantastic. Chris, again, thanks for joining here and, uh, let's, let's dive into it. Yeah. So I don't think you need that much of an intro. Founder of Refine labs, doing revenue R and D, pretty darn active on LinkedIn, uh, causing some great stuff.
[00:01:36] So really excited to have you on. And today we're going to talk a bit about, the wonderful subject called planning.
[00:01:42] Toni: So especially marketing planning, right? We're starting to enter the season a little bit. Some big organizations already thinking about it. Some small organization will start thinking about it and, you know, Q4, some of them a little bit later.
[00:01:52] And obviously with Chris, we want to specifically kind of go around the whole topic of marketing planning, right? So on the, on the sales planning side, you usually have like a head count and then you have some conversion rates and that's kind of straightforward. Marketing is a little bit more difficult and that's why we were thinking Chris can, can maybe help us illuminate that topic a little bit.
[00:02:12] Mikkel: So Chris, I think first off, let's talk about some of the challenges you're faced with when you're going to plan the specific, the marketing motion for next year, what are some of the big challenges and problems you see when it comes to planning for businesses today?
[00:02:26] Chris: Yeah. Let's, let's back up a sec. You can hold that question. We'll get to it before we get into that. I just want to give a little bit of explanation of who I am. So, uh, for people that don't know me, my name's Chris Walker. I'm the CEO of a company called Refine Labs. Over the past four years, we've worked with more than 250 B2B SaaS and tech organizations to transform their marketing or revenue generation engine, um, through go to market consulting, paid media execution, content, and creative.
[00:02:51] Um, planning and things like that as well. Um, and through that, that motion with tons of different companies, we've identified a lot of different, a lot of patterns in what we see in the data and how companies operate. So B2B companies might think like, Hey, this challenge, uh, this may or may not be a challenge to us.
[00:03:08] I don't know. Cause it's just me and my company. But when you look at it from my view and you see a lot of companies and you see their Salesforce data, you can start to extrapolate patterns. And when you see it nine times out of 10 with a company, you can start to make the. The assertion that there's, this is happening almost across the board.
[00:03:23] I think that's why a lot of my LinkedIn content resonates with people is because I'm able to see patterns from a larger view and communicate them. And they're like, Oh, that makes so much sense. I see that in my business, our metrics look like that. Um, and so I think I have a very unique perspective as a, as an aside, and there's another thing, like a lot of people view me as a marketer.
[00:03:43] I view myself as a revenue professional and a business professional one. I'm a business owner. Um, and number two, we do marketing and sales together here. Um, so in the past, in the past, uh, three years, I've probably sold more than 30 million in total deals, right? So I have a very, very, uh, meaningful respect for how sales and marketing need to work together to drive overall revenue, which then leads me into the planning.
[00:04:07] Companies typically look at this as marketing planning and then sales planning, they'll do sales planning with a reverse headcount model based on number of leads with conversion rates, and they'll have marketing planning, trying to feed that number of leads to the sales team in order for conversion.
[00:04:20] And we really need to look at this as one overall planning system and how are we going to plan to hit the pipeline and revenue targets using all the resources that we have available on the revenue team. I think that has to be the first layer in how we look at things. And then as you get lower, yes, you're going to have an individual specific sales plan and a specific marketing plan.
[00:04:38] But I think looking at them. Overall at a business view becomes a really powerful view.
[00:04:44] Toni: How do you, how do you think about the process, right? So usually when, when we see this, usually it's the board and the CEO and the CFO, they come up with a number, right? And previously this has been. You know, triple, triple, double, double, uh, for, for some of, for some of the audience, you know, I think obviously some, some of that, you know, got a little bit more refined recently because simply kind of a capital squeeze coming out of this.
[00:05:07] But, uh, you know, once that target is being created and then it needs to be a bottom up, how do we actually do this? I mean, where do you see marketing coming in and where do you see, you know, how do you see them maneuvering this problem set in, in, in that sense? Right.
[00:05:20] Chris: Yeah, we need to have, we're going to have both a tops down and a bottoms up approach. We help companies a lot with the bottoms up approach to validate whether or not the tops down is actually realistic on the budget spent in combination with the historical performance data.
[00:05:34] But the first way you have to look at this is where, where are all the places that we capture demand into pipeline?
[00:05:39] These are very common places. We call them pipeline sources. You have your website, you have events, you have outbound, a cold outbound. You might have intent driven outbound or account based outbound. Partner, those are probably five of the major categories of, and then you have like low intent, lead generation, content, syndication, gated content, things like that.
[00:06:00] So you typically have about as a well functioning company, somewhere between three and six total sources of where most of your pipeline and revenue comes from. When you look at it at that view in aggregate, then you need to look back at the historical data and say, of those majors of those major pipeline sources.
[00:06:16] How, how much pipeline we standardize pipeline based on a win rate, win rate metric to ensure that the pipeline is standardized. How much pipeline is each pipeline source creating over the past 12 months. And then if we do certain things, what are we going to expect for each of these sources to convert in the future?
[00:06:36] So for instance, you're trying, you, you're getting results from your intent driven account based outbound motion with three BDRs going outbound. And now you're, you see that motion. You're saying, okay, next year, we're going to move that up to six. And we're going to expect this type of performance forward for it.
[00:06:50] So you can look at these, all the individual pipeline sources and then make a decision as a company of which ones are already working for us. And then how are we going to use that, this data to make each of those pipeline sources work better or cut some of them. Um, and so I think that becomes a really good first view is centering it on demand capture.
[00:07:10] Where are the places that we get people into pipeline? A lot of people will look at that as sourced, um, and a lot of people have been moving from a sourced model to an influenced model because they previously used the source model to say that 100% we got that person on outbound, 100% credit goes to outbound, which is not the right way to look at it.
[00:07:30] But if you do use, if you use sourced appropriately, you need to have the view. You need to be able to see how are we converting buyers that are in market into pipeline, you need to be able to see that. And so that's where the sourced metric comes from and then how we use it becomes very different. Um, so that's, that's level one.
[00:07:50] And the next level is, okay, we have this, we're capturing this much demand right now. At some point, we're gonna have to figure out how to create more net new demand. Demand is being created in every one of your markets already, unless you're a brand new company, by potentially analyst firms, word of mouth, some of the stuff that you're doing, doing some of the stuff that your competitors are doing.
[00:08:10] So demand is being created, which then the pipeline sources capture. And you need to figure out how are we going to go out and create more demand on our own to grow the overall market size. To grow the amount of buyers that are in market.
[00:08:23] Toni: do you think that, do you think, first of all, this methodology, not everyone thinks like that, right? I think this is, this is number one, kind of, there's an educational piece where people also need to buy into this approach. And then the other piece is also, you know, you just rattled off a bunch of different channels or, you know, however you want to call this, there's also lots of data that needs to be captured and organized and structured and so forth.
[00:08:46] Is that, um, you know, what do you think is, is. Uh, are many marketing teams even struggling to get to that point or what is, what is, what is the issue for them?
[00:08:56] Chris: The crazy thing is that most mature organizations, I'm saying 10 million in revenue above already have the data in their CRM that shows this. They just don't look at it this way. They'd rather go to a visible touch point report and say, Oh, like. 60% of our customers went to our blog before they bought and you have no real concept.
[00:09:16] You can say, yeah, the blog's doing something. You can prove ROI, but you can't actually look tangibly and say, are we getting the return that we're investing in that specific program when you use a pure influence model? Um, and so they're just, they have the data in there. We go in and analyze companies all the time.
[00:09:31] They have the data. We just look at it in a different way, which then gives us this really interesting view. When you start to separate the idea of demand capture from demand creation, which companies usually mix together and just look at it as a lead gen model.
[00:09:44] Another thing to think about when you do, when companies do planning, oftentimes it's in serial.
[00:09:48] So marketing does all this stuff produces this many MQLs and then sales does this stuff and produces this many opportunities, blah, blah, blah. And the reality is that if you actually just look at that system overall, when we go in and analyze companies, you realize that 99. 7, 99. 8% of the leads being generated from marketing don't convert to pipeline. And so, and, and so there's a bunch of activity. There's a lot of metrics being calculated. There's ways that we can get a touch point. So if the account closes in nine months, we can say we influenced it. But in, in reality, there's, there's clear data to show that a majority of the marketing expenditures and the majority of marketing quote unquote MQLs are actually hurting the business.
[00:10:34] They're hurting, they're hurting the sales team. They're making BDRs follow up with people that don't want to buy. They're distracting the sales team from the accounts that are in market. They're distracting the sales team from the best fit accounts that their business wants to go after. In order to get, you know, 40 to 60, 000 MQLs, you're not going to be focused on a specific type of buyer.
[00:10:55] To get that amount of volume, you have to go wide. And in order to get that amount of volume, you have to go to people that have the right job title. But are, are definitely not in market to buy. And so then you just have this big assembly line where we're, where we're basically sending a bunch of people that don't want to buy right now to our sales team.
[00:11:14] They go and engage, try and have conversations, close them at a super low rate. You have, then you end up having bloated SDR headcount. You have bloated sales headcount. You have a lot of wasted marketing expenditures. It makes the whole revenue engine very inefficient. And so as a, as a first step, we need to go back and look at the historical data.
[00:11:32] Most companies are probably running some MQL model with clear tracking against those MQLs and go and look back at the disposition of all of the MQLs that we've collected over the last 12 months. And then start to categorize them into patterns. Where did they come from? How, you know, how many converted to pipeline?
[00:11:48] How many did we win? What was the lead to win rate? How much did we spend? What was the estimated cost of acquisition on these programs? And then you can sort of look and say, okay, these four or five things that we did. We did an analysis for a company just a couple of weeks ago. Um, the CMO came to us and said, we need to, we need to save 20% of our budget and still hit our number in Q4.
[00:12:08] We have a 9 million budget. We analyzed the data over a six week period of time and we found 1. 7 million of spend where the data was clear that the money was being wasted, which was 19%. So, and we, we expect that the budget to go down by that amount with no or negligible negative impact to pipeline creation or revenue production.
[00:12:30] Um, that, and then you just bring the budget, like you're bringing the budget down with no impact to pipeline. You immediately reduce CAC by at least marketing CAC by 20%. Um, which means that if you spend the same amount of money, you get 20% more customers. Um, and so, and, and just like companies have not been looking at this over the past two to three years because of how the, the growth of all costs and all the investments going in and the ridiculous revenue multiples.
[00:12:55] So they haven't been really concerned about the efficiency of their overall go to market. And then all of a sudden you get to 50 million ARR, you got 50 to a hundred sales reps. You have a big BDR team. You spending 10 million a year on marketing programs. And all of a sudden you're like, our, our cost of acquisition is 48 months, 60 months.
[00:13:13] Um, and then you, you really have to go back to the drawing board, cut all of the things that aren't working and then slowly build back up, which is really what you're supposed to do when you scale,
[00:13:23] get the efficiency, right? What if you're scaling a business, get the gross margin, right? Get the process repeatable, then scale in, in revenue generation, get the cost of acquisition, right?
[00:13:34] Get the process repeatable, then scale. And then during this past three years, specifically like 2019 to 2022, companies would come and say, we spent, we only spend 20 K in advertising right now. And we want to spend 500 K next month because we just got an investment. It's like, that's the, that's the best way to waste $6 million a year is to just sp blindly spend a half a million dollars on something net new per month.
[00:13:57] Um, and so those types of days are over, but there's a lot of, there's, there's still quite a bit of a mess that needs to be cleaned up from that time.
[00:14:06] Mikkel: oh yeah, it's still, still unwinding, but I want to circle back to something super interesting you said here which is, there's actually a bit of collateral damage happening.
[00:14:14] Because of these investments, that you might be making to generate MQLs. One thing is you're burning marketing budget, but you're also burning time on SDRs who could have gone out and book meetings, right? And, uh, I think coupled with the fact that you recently shared, I think the efficiency of running lead gen ads just isn't there. Uh, I think taking the steps to identify the waste is, uh, is super impactful.
[00:14:39] Um, so you're basically proposing that you run this analysis, break down the channels to look at where are you actually driving revenue from those different pipe sources, correct?
[00:14:49] Chris: Yeah. I want to hit on a couple of points here. Uh, number one is the hidden cost. The hidden cost of all of the sales resources, the sdr, bdr, and the sales team. That is spent engaging, spending time on having meetings with building proposals for people that don't buy. So even when the BDR is going to go and convert one of those low intent MQLs, one of the thousands of them to a meeting, the sales team is going to win that meeting at significantly less rate than other pipeline sources.
[00:15:19] And that data is clear just based on the overall intent of the buyer and how they enter. So there's a massive amount of hidden costs on the sales side that's happening that's created through this high volume MQL model, which ends up, it's basically ends up being low sales productivity and an overall bloated sales team because the reverse headcount model has been built on very low conversion rates of MQLs.
[00:15:40] So that's one thing. There was a, uh, a dataset published recently by a company called metadata who, um, had over a 12 month period of time, had 42 million in spend run through their platform. I posted on LinkedIn. It was one of my best performing posts in the past few years recently. Um, they had 42 million in spend, likely more than a hundred total companies in the sample that, that were, and 90% of the budget that was being.
[00:16:06] Analyzed was on, uh, lead paid social lead gen programs like Instagram to run specifically lead generation campaigns and the overall outcomes of that data set, which I've seen anecdotally as I analyze companies, you know, month over month for the past three years. Is that the average lead quote unquote lead, if we even want to call it that from a lead generation campaign on paid social will become a customer at 0.
[00:16:31] 3%, which means that your sales team talks or engaged, tries to engage with 333 people to close one customer.
[00:16:37] Toni: Yep.
[00:16:38] Chris: The data that I've seen is actually worse than that. Typically with these types of programs, I see somewhere between one and every 500 become a close one customer to one in every thousand.
[00:16:46] And so you can see that can be fine when you have three reps, but when you're a 50 million company with 50 sales reps running. The machine just gets so, so inefficient, um, which I believe is one of the main reasons why we're seeing low quota attainment. Part of it is bloated head count. And part of it is, uh, like low quality marketing activities that aren't actually driving results for sales.
[00:17:06] Toni: So, so my question is the following, right? So, Why, why is this really happening? Because I'm not buying the, Hey, you know, everyone had too much money and that's why everyone is buying MQLs and they convert shit. I think a lot of people have seen this. It's also the first time that AEs and SDRs are complaining about low performing MQLs.
[00:17:25] Right. So that is kind of known to people, I think to a large degree. And I think there might be nuances to that. Don't get me wrong. What, why do you think does that problem exist? Why do you think does it, does it persist for so long, actually?
[00:17:40] Chris: because in the late 2010s and probably up to the mid, the late 2000s and up to the mid 2010s, this was considered the best practice.
[00:17:50] Toni: There you go.
[00:17:51] Chris: and the reason that it was considered the best practice is because we didn't have contact data. We didn't have account intent data. And so in order for sales to have somebody to call.
[00:18:03] We needed their email address and their phone number. And now in 2023, there are a million sales contact databases that have decent accuracy. So you could go and pull in, pull an account out of zoom info or wherever you're getting it from, pull the, the, the contacts out of that, and then trigger outbound against that instead of wasting 300 dollars to get those email addresses from marketing MQL dollars. And so there's just, it's very different. And then, and then back then, there, the, the way that a B2B buyer bought was very different. It was an analog buying process. Like most B2B companies weren't taking anything digitally seriously in the early 2010s. And so like if you, you had to get some, some email address or phone number from a trade show or something like that, which would then have your sales team have people to call because of the marketing didn't produce that they wouldn't have anybody to call.
[00:18:55] Um, and so just the world and that, that became the best practice. And now over time, there's been a lot of technology vendors that have then created. Technology, marketing and sales technology that operate around that thesis, because it's very easy to sell someone something that they already think they need versus retraining them to think completely differently. It's a much easier, it's a much easier sell. So technology vendors take the path of least resistance. It's no fault to them to build something that the market thinks they need, not necessarily what they actually need. Um, and so I think that's the main reason why we're still here. You can see, and we're in the, we're, we're.
[00:19:37] It's, it's crazy. We're still in the very early adopter phase of this transition inside of companies, companies that are properly adopting quote unquote account based marketing oftentimes are going to move away from a lot of these things. Um, but I think even as they adopt account based marketing, there is a, there's a lot of underlying principles that they still use that they would need to relearn.
[00:20:00] Toni: So trying to kind of maybe, so we're digging really deep into, into this problem is really cool. So kind of trying to kind of go back a little bit to the planning side. Do we actually think that, you know, sometimes this looking at past performance, we using those MQLs from last year, we looking at those conversion rates.
[00:20:16] It's so convenient, so easy to set an MQL target that you then need to hit dear CMO. And then it's like, okay, cool. Let's hit this MQL target. And obviously conversion rates then suddenly look very different. Do you think that this is to a degree kind of a root cause, kind of the way some of the planning is actually being run and maybe top down, maybe from the CFO kind of handing down those MQL targets?
[00:20:35] Do you think that this has, this has played a role in the past and in this, in this train, train wreck unfolding?
[00:20:41] Chris: Without a doubt, it's, it's very easy to go back and look and say, how much did we spend on marketing? How many MQLs did we get? Okay. Our cost per MQL was $192. Next year, we need to grow revenue by 30%. So let's just increase the budget by 30% and keep getting 192 MQLs. The problem is that as you scale that, you get, uh, extreme diminishing returns.
[00:21:04] And you find that all of the money spent on low quality MQLs isn't actually what drives the revenue. There's actually a small subset of people that actually are in market and want to buy and come through different channels, which is in the thousands of people, not the tens of thousands or hundreds of thousands.
[00:21:19] And those are the people that actually buy stuff. And so part of the problem is that companies blend all the MQLs together. Instead of looking at them as distinctly different and then modeling against distinctly different because a buyer that comes in and says, I want a demo of your product and I'm qualified and I'm a decision maker is going to buy somewhere between five and 12% of the time when they do that and the same exact person that doesn't do the demo requests and downloads a piece of gated content on LinkedIn or some third party website, you're going to win at 0.1%. Which is somewhere between a 50 and 120 X difference in overall productivity and win rates just based on the intent of the buyer. And what's the easiest way to get a bunch of like cheap MQLs to focus on the people that don't want to buy right now and serve them gated content to get their email address.
[00:22:05] And so the, yes, the, the planning and how it happens is the root cause. Part of it is the mindset. Part of it is the mindset that. We, if we get, uh, all MQLs are the same. And if we get this many MQLs and our sales team will convert at this ratio. So part of it is the mindset of what is marketing supposed to do.
[00:22:23] Marketing has an obligation on demand capture, demand conversion and demand creation. But most companies only put the marketing budget toward demand capture. And so, and then they focus and then there's only so many people in market. So, and if you're not driving more people in market, you have a, you have a max amount of demand that you can capture.
[00:22:44] And then all the additional budget spent is just wasted on low quality lead gem. Um, so I, yeah, I do believe that planning is the root cause here. Um, maybe it comes from the CFO. A lot of times it's self inflicted by the CMO, because
[00:22:58] sometimes they don't know any better. Um, but it's definitely like, it's definitely a problem between the CEO, CMO, Like, those people need to get aligned on what has changed in the world, and how do we need to adjust our planning models to adapt to it.
[00:23:13] Toni: So, Chris, um, now we talked a bit about the waste and this specific challenge here, right? At the end of the day, you're going to have a budget that you need to distribute across demand creation and demand capture. How do you go about that piece when you know where we want to cut waste potentially? How do you go about the optimal kind of resource allocation?
[00:23:33] Chris: So a majority of the budget's already being spent on demand capture, 80% or more. Um, company will argue that like they did a billboard campaign or that their trade show booth was for brand or something like that, so there's 20%. But 80% is on performance marketing lead gen or other forms of demand capture.
[00:23:52] The first step is just to figure out what is the appropriate amount to spend there I know we're spending 80% of our budget right now but how much should we be spending which is typically somewhere between 20 and 60 percent less. So you optimize demand capture for the amount of buyers that are in market to buy So for instance the way that you could get there is you could you have a bdr team. And you say, we're going to hire a new, we, we have some type of efficiency that a BDR can work this many accounts over this period of time.
[00:24:21] And we're not going to hire another BDR until we have 30 more accounts in market that justifies us hiring them. Um, and so you, you, you think about the demand capture budget, both across like the marketing things and the BDR things and other things that you're doing, like events and partnerships. So you almost look at demand capture as separate across the revenue teams.
[00:24:42] Toni: So basically, if I kind of recap this just a little bit, right. So basically it's saying like, Hey, minimize your demand capture, which really, and demand
[00:24:50] Chris: you know, I would say, sorry to interrupt you. I really say optimize,
[00:24:54] Toni: Yeah, yeah, yes.
[00:24:55] Chris: optimize it to hit the right ROI. So it's not like we shouldn't spend anything there, but companies dramatically overspend there. So it's optimized against like pipeline dollars per dollar spent. That's what demand capture should be evaluated against.
[00:25:09] Toni: no, absolutely. And then basically kind of, you have, quote unquote, the rest of the budget to spend on demand generation itself, right? So really. and, you know, maybe I'm forgetting one of them, uh, but really you have, you know, parts of this is demand capture and then the rest you can spend on some more demand gen activities, which is first of all, also, again, a bit of a mindset shift and many organizations need to kind of be led through.
[00:25:31] Right. So I think you've been doing a fantastic job on shaping demand gen and making this a thing over the last, I don't know, what is it? Two, three years or something like this, Chris. Um, and, uh, and there's more and more people waking up and saying, Oh, you know, it shouldn't be like this. You know, we shouldn't have a demo request on Facebook.
[00:25:45] We should rather, you know, drive demand if we're using this channel, um, you know, through, through ads. how do you, you know, and let's just say I'm the CRO here and I need to, you need to convince me that actually going to bring in, you know, those leads and those demo requests and those high converting MQLs.
[00:26:01] how do you actually then, you know, plan out that next year, right? How do you, how do you do it? You know, if, if you really go down and become super tactical around it, you now have a really nice budget. I don't know, five to 50 million, whatever the size of your company and your marketing CAC might be. how do you, uh, plan out next year, in order to really kind of build this case with a CRO and say like, Hey, this is, this is how I'm going to deliver your pipeline.
[00:26:26] Chris: Number one, level set on the analysis of the data and get the CRO to buy in that, hey, we generated 49, 000 MQLs during this time and we closed 33 deals and we spent this much money and your team spent this much time. And the cost of acquisition we estimate is this and this is bad. This is bad for both of us I'm wasting my money and your team's wasting your time and you need to hire more people than you actually need because of this problem. Level set on what the actual issue is.
[00:26:52] Then at the marketing level, we need to go and look and say what was our overall cost per qualified pipeline dollar, for the amount of money that we spent So, and if you go in and look at this at a company, it can, it can range widely, but when you look at it between all the marketing spend events, lead gen, digital advertising, excluding headcount and tech costs.
[00:27:17] Then you can see, this is like, this is what the efficiency of our overall spend is right now. For every dollar we spend on marketing, we get this much on pipeline. You could also look at it as cost per qualified opportunity, which many companies do. When you get some cost per qualified opportunity, what you're gonna most likely find is, Hey, we're spending way too much money for a qualified opportunity based on our win rates and our allowable CAC.
[00:27:39] We need to bring this down. How do we bring this down? We cut out all the shit that I just told you about that isn't driving results. Okay, now we just went from 6, 000 per qualified opportunity. Now we're down to 3, 000. Once we get to 3, 000, which is acceptable based on our win rate, that we have an acceptable customer acquisition cost across our entire revenue engine, then we start to deploy money to build back up.
[00:28:00] And we deploy money slowly. We deploy money methodically. We deploy money on new programs that are used to create demand, to drive more people in market while we continuously optimize demand capture. And that's, that is really the focus.
[00:28:13] And then from a planning perspective, if you methodically think about it and plan appropriately, oftentimes the growth goals of companies drive the wrong behaviors.
[00:28:22] It happens a lot. Okay. Uh, if you're trying to get fit in a year, you're going to do different things than if you're trying to get fit in seven days, you're going to cheat when you try and get fit in seven days and you're probably not going to get the result. And then at day 14. When your five day fast ends and you've taken all those fat burners, you're gonna gain back the weight.
[00:28:42] Um, and so, part of this is a goal problem. If you're actually trying to build a scalable revenue engine, you don't do it by flooding money for MQLs and scaling sales headcount. It just doesn't, it just doesn't work like that. But that would be the conversation I have. And here is the roadmap over the next 9 to 18 months.
[00:29:00] Of how we build a scalable revenue engine that's going to scale across the growth of our company. So that that's the conversation i'd be having as revenue leaders.
[00:29:09] Toni: Yeah. And, and to the, to a degree, right. I think, you've been also popularizing the revenue engineering process, right? To a degree, it's actually speaking to this if, if I'm not mistaken. Right. So this is really, um, Hey, we now have budget. Now we're building up again, and then converting this into a roadmap.
[00:29:26] I think, you know, one of my questions there, and again, right. I'm this, I'm this CRO, I just need my leads. And that's what I want to have because I need to, you know, hit this target here. I would assume that, let's just say in Q4 you do the planning for next year, it will be basically impossible for you to actually know what the actual things you will be doing in q3, Q4, and so forth, right?
[00:29:48] So you will have big visibility into q1, maybe q2, but then it kind of stops, right? So this is where, um, let's just say the budgeting cycle and this. More agile approach to let's figure out what we're going to do next, where they're kind of clashed to a degree. Right. first of all, is this, is this a right way to, to describe it?
[00:30:07] And number two, if, if it is, how do you, you know, how do you, how do you take this problem then and work it through the organization?
[00:30:15] Chris: Yeah, this is, this is a complex problem that involves all the people in the companies, including the board and the investors on, on growth. so this, it's a, it's a comp, it's a complex problem. One of the, one of the easy ways to level set, especially with it in investors and the board is to do what we call a split the funnel analysis where you take, where you basically force categorize whether the, the MQL that you got was a low intent lead.
[00:30:43] Or a declared intent lead declared intent, meaning that they said, Hey, I want to talk to your sales team about buying this stuff now and low intent, meaning that they didn't, and that we assumed that they wanted to buy based on some other action, like an MQL score or opened an email or visited our website.
[00:31:01] Or anything, but didn't actually take that action. When you split those out, you'll find that a majority of the revenue comes from people that said, Hey, I want to buy now, at least on, on what we, most people would call marketing sourced side. So all of the marketing MQLs force divide them. And then you look at the, the disposition and the, the sales velocity metrics between the two.
[00:31:20] And you say, okay, these ones over here, the declared intent people, we win them at 5% and the low intent people. We win them at 0.2%. So if we remodel, if we remodeled the entire revenue system around only the declared intent people, maybe next year we only get 3, 000 MQLs instead of 50, 000. But those MQLs convert to revenue at 100, uh, what would it be?
[00:31:46] 100x more. A hundred X better conversion rate from close one. because we only focus there, we don't need programs to get a thousand MQLs at a time we need to generate five, 10, 20 more of the people that said, Hey, I want to buy now every month, instead of thousands of people, when we look at the MQL model.
[00:32:06] So, and so it's focusing on where do we get the best sales velocity? Where do we get the best customer acquisition costs? Where do we actually win and what is the most scalable? And when you look at them objectively, you find that declared intent buyers in today's age are the places where marketing should be focused on capturing.
[00:32:22] Specifically through the website, then we have a whole other motion called the outbound motion and the outbound motion should be triggered off and count account intent data. And so I would look at it as those two, those two things as an initial part,
[00:32:36] Mikkel: So, one of the things I've at least myself have experienced is once you go into this planning cadence, there's a desire to hit a very specific revenue number just from, from the marketing motion and you run the different scenarios. So spreadsheet land here, and you can just see there's a delta, there's going to be a gap.
[00:32:54] How do you go about that when you, when you come to that stage, you run all the analysis and you see there's a delta, how do you get past that point to actually end up with a plan that, you know, gets you home?
[00:33:05] Chris: you you look at it, you look at it like a business professional and you look at it and say, oftentimes it's not the model that's the problem. It's the goal like I don't. That's and, and, and so that's obviously a hard conversation to have people that raise, people that raise a bunch of money sort of forfeit some of that autonomy to make the right choices.
[00:33:31] And then what happens is that gap ends up driving more spend and that it lowers the efficiency and you're back where you started. because you can't just, you can't just wave a magic wand and immediately have a bunch of companies that really, really, really want to buy your product. You don't just get, you don't just like high, it's not like e commerce where you just turn on ads for 30 days and you get an extra 200 K in revenue.
[00:33:56] That's typically not how it works in SaaS, especially long, like extended sales cycle, complex SaaS. And so I, I believe that oftentimes the goal drives a lot of the wrong behaviors, which gets, keeps companies stuck in the current model.
[00:34:10] Toni: I think it's so, I mean to a degree, right? And I'm maybe being a bit, assumptive here, but, I mean, as, as Refine labs, you must have those conversations probably a lot, right? Kind of, you know, let's get Chris Walker in and the team, you know, he's going to figure it out. And we have this crazy number.
[00:34:25] We just raised, 50 million. and then do you, so this was not, this was not a question that we prepared, but do you have like this moment where, you come in, you do your analysis, you split the funnel, you unblend the funnel, you do all the stuff. And then you need to tell them, friends, I think the goal is the problem.
[00:34:44] Is that, is that something that you run in sometimes?
[00:34:47] Chris: have direct conversation with the CM, CMO and the CEO, and sometimes the CFO,
[00:34:51] Toni: Yeah.
[00:34:52] Chris: here's what you did the last 12 months. Here's what you're projecting for the next 12 months with the, with the current budget that you have. You're going, like your customer acquisition cost is going to go from 25,000 dollars per customer down to 4,000 dollars per customer.
[00:35:07] This doesn't make any sense. You need, you need to remodel and level set the goals and spending away more money to try and get that to happen is just wasting your own money. Um, and so yes, we have those conversations often. You can show it with data. Does everyone say, okay, Chris, you're right. We're going to change our goals.
[00:35:24] No, that's not what happens. But the customers that aren't going to change their goal, just set themselves up for failure, and I don't want to be a part of that.
[00:35:32] And so if they, if they want to continue on with an unrealistic model, the unrealistic goals, which lead to unrealistic behaviors, and non customer centric behaviors, then we'll let them go and do that on their own.
[00:35:44] Toni: but I really liked the, I mean, it's, it's not, you know, and this is also something to take away for anyone, you know, listening to this. It's not, it's not Mr. Chris Walker walking in and saying, Hey, it ain't happening. you went the team using data to argue back. Right. And I would say if used in the right hands.
[00:36:01] People can also do that without using an agency in order to kind of make that case for them, right? I think this is, this is something where, this, this methodology and the, and the data approach that, uh, I think that you are kind of, uh, bringing to the table, I think where a lot of people can learn from that and, and build persuasive arguments, I don't want to say against the CFO, uh, but have a basis to argue, uh, their case that might change something on the target setting.
[00:36:29] Chris: Yeah. And another thing to think about is when you're, when you're a growth, I would say growth stage, right? You're 30 million plus in revenue. As you start getting closer to a hundred million, like you're not trying to triple, triple, double, double
[00:36:42] anymore. Growth expected growth rates are 30 to 60%. And like, and when you look at a realistic attainable growth goal for a company that has market traction and product market fit.
[00:36:55] And an experienced sales team that marketing can be the main way that you get that 30, 30 to 50%. Um, and so I think it's, I think it's really interesting depending on the stage of the company that you work at as companies get more mature and they have more historical data and their executives are more experienced, they also plan more appropriately than early stage companies.
[00:37:14] Toni: I have a, I have another one for you. Sorry, Mikkel. No, no, go. You're the marketing guy and I'm asking all the questions. Yeah, I know. But Chris also said I'm not just a marketing guy. There you go. No, that's true, actually. And this is also where my question is going. So there will be a bunch of RevOps folks listening here, um, and RevOps with a capital R, so really looking across the whole funnel, not just, uh, not upgraded sales ops, by the way, we also love upgraded sales ops.
[00:37:37] Um, the, do you think, so what's, what's your opinion actually? Do you think the whole RevOps movement is this helping with this problem? Is it making it worse? Do they not have anything to do with it? Are they just doing tools? What's your, what's your opinion on revenue operations? And that can.
[00:37:53] Help with this thing, right? Because it is a data problem and some of the data stuff is coming out of tools and so forth. So they're kind of in the mix to a degree.
[00:38:02] Chris: So I think RevOps is in the most opportunistic, great seat to fundamentally change this specific problem inside of companies that unlock massive growth. If you're a VP of RevOps, you are in the right seat to make this change. The challenge that I see with a lot of RevOps professionals is that they've never done sales before, and they've never done marketing before.
[00:38:25] And so it's hard to weigh in on the go to market strategy when you've never executed either of those things. I think that's why I'm very, I don't, I guess I sort of consider myself a rev ops professional. I would consider myself a peer to a VP of RevOps. but I think because of the other experiences that I have, I just look at it very differently because I've done marketing and I've done sales and I understand the process and I talk to customers and I get that feedback.
[00:38:49] Um, and that doesn't happen a lot in RevOps. So it's, it's difficult if you don't have those experiences to, to really move the needle here to know what to look for and do things. We lay, I lay out this playbook on podcasts. We have it available in our product, the vault. We post content about it all the time.
[00:39:04] And so, and when we partner with companies, the initial partner is typically the CMO and the leader of the RevOps team. And those are the two people that we're working with initially on this project. It's not getting the director of demand gen involved initially. It's not having the sales leader involved initially.
[00:39:18] It's like, we need to look and scrutinize this marketing spend all against revenue. And these are the two people that really do it. And the funny thing about, um, about what I see in the, in RevOps is that typically the, the, the RevOps person, even down at the manager level, we're talking like marketing operations manager, they know the shit isn't working.
[00:39:37] But they haven't figured out how to properly explain it to a CMO or an executive team in order to drive change. Um, and so I see a very large opportunity from, from RevOps. And, uh, I think that there's that a lot of people could be capable of, of doing it, but when it actually comes down into practice, I don't see that many RevOps leaders.
[00:40:00] Proactively driving this type of change within companies partnering with the revenue leaders.
[00:40:07] Toni: I totally agree. I mean, they're, they're kind of sitting there at a perfect vantage point, really. Right. Uh, they're, they're sitting at this intersection. They're seeing it all the way throughout the funnel. They're seeing it's not working. They're probably listening to your podcast, by the way. I'm, I'm pretty convinced of that.
[00:40:21] Uh, but
[00:40:22] then, you know, uh,
[00:40:23] Chris: Revenue Vitals on Apple and Spotify.
[00:40:25] Toni: you go. but then turning this into strategic insight and pushing this agenda through, I think it's to your point, because there's some of the gray hair missing that, you know, would have been accumulated in sales, marketing, and CS, uh, that they kind of have trouble sometimes to bring this point, uh, fully through and, and, and pushing then a project, uh, in the right direction.
[00:40:44] Yeah.
[00:40:45] Chris: I do, I do find that this role is typically heavily influenced by technology, by the technology that's being used. Companies as well, which I think is a crutch and I think it drives a lot of the wrong things. Um, so you, you see a lot of obsession around attribution, implementing other tools. And not saying, not saying, what is our attribution strategy?
[00:41:06] Start with that. What KPIs are we optimizing for? And then figuring out what pieces of tech need to go, need to be installed in order to drive that. The technology drives the strategy, not the other way around. Um, which I think is another sort of fatal flaw in this, uh, this department sometimes.
[00:41:23] Toni: Totally agree. We had, uh, not to name drop, but we had Jacco van der Kooij on the, on the show last week, actually. And he is predicting, um, or let's just say warning that, uh, Ravops while in a fantastic position, he also agreed is, uh, is, is in danger of becoming the new head of IT, you know, and not. Yeah. And, and that is, that is something that's just, you know, that would be a waste kind of to take this, take this position that they're having and kind of not actually driving, I think we would say a revenue strategy. I'm not sure if you would be using the same words actually for this. and then kind of actually focusing on generating cash, uh, either through more revenue or through, you know, less cost instead of focusing admin thing all the time.
[00:42:11] Chris: Go to market strategy and, and revenue strategy owned in, in partnership between the CRO, the CMO, and the head of revenue operations. Feels like the appropriate way to use these resources. The problem is that companies really struggle to look at things new. Right? So, revenue operations Is technically a new thing, just like it may not that new, but it hasn't been around for all that long. but the problem is that they take all of the old rules that marketing ops, sales ops, and CS ops played by and grew up with, and they bring all those old outdated rules that don't belong here anymore to the RevOps function.
[00:42:52] and then that's part of why I think we're seeing the function go in, in the direction that it's going. They don't rethink the hiring profile. They don't rethink the job responsibilities. Um, it's basically like, I, I hate to say it, but it's basically a rebranding of marketing and sales ops. Um, and, and so, and a lot of that ends up being task driven, insignificant, small tasks, like build this report, see if we can get this piece of data and implement this tool because our BDR team decided they wanted it instead of looking and draw, like, Oh, actually proactively driving the strategy.
[00:43:27] Um, and the best ones that I've worked with are like absolutely invaluable to companies. but right now it's just a, it's a really small percentage of RevOps leaders that are operating that way right now.
[00:43:41] Toni: I'd agree. I have another point of, if you don't want to wrap it up, let's do a final closing point. no, I mean, so this is, so, I mean, I'm going to say it now I'm, I'm a little bit of a Chris Walker fan boy from like a while back, kind of my, my, my, you know, mood has, you know, uh, what is it like chilled since now, but so what really, what really drew me to some of your content early on was really this, I was, I was a COO trying to understand marketing, right?
[00:44:07] Uh, because we had a marketing problem and try to understand it. I looked at this stuff. It didn't make sense. You know, everyone is having kind of this waterfall thing and, you know, it was all over the, all over the place. It was really difficult. Okay. How, how, how do you want to, you know, how do you actually want to run marketing and challenge the VP that reports to you?
[00:44:24] I think you were one of the first ones where I was listening to your content. I was like, Oh, Hey, that must actually sense. That is actually a logical story being told that I can totally see from a, a first principles approach that, that actually totally makes sense. You know, there's, there's not just infinitely more people sitting around wanting to buy your product.
[00:44:42] You need to educate them first. It's going to take some time. It's difficult to prove attribution, yada, yada, yada. I actually believe that, You know, RevOps pros kind of in that, in that area, they need to start thinking a little bit more, you know, where, where is that stuff really actually coming from?
[00:44:58] We are not aware of those buyers coming from, why are they not converting? It's not just, Oh, the conversion rate is bad. It's like they were never interested in the first place. That's why they're
[00:45:06] Chris: Why is the conversion rate
[00:45:07] bad? What's actually happening from the customer's perspective and what should we do about it instead? Rev Ops is typically just surfacing the data saying, Oh, the conversion rate is 0. 3%. What do you want to do, CMO? Not, here's why. They all come from this place. They all come from this place, which means that they don't have intent to buy, which is why the conversion rate is 0. 3%. What we should do instead is stop doing this and save a bunch of money. And it's, yeah, like I, uh, I need to come in and the company needs to pay, pay me a bunch of money for consulting to, to validate what they already think.
[00:45:41] Toni: No, and I mean, it's, it's so, especially on this MQL thing, which is like, it's so popular. It's crazy. I mean, this unblend the funnel that, that really works well. Right. But it's for a RevOps person that is truly revenue operations, like end to end. They can make a great case for this, for the CMO and the CRO, right?
[00:45:56] It's kind of, Hey, you need fewer people to work through those shitty MQLs and you need fewer ads to serve them in the first place. I mean, it's a, it's a, it's a straightforward message that someone in revenue operations could run. And, you know, everyone was listening, um, uh, please, please check your funnel and, and see if there's, there's room for you to optimize.
[00:46:15] Chris: When, when the whole company, but specifically RevOps stops looking at it between marketing and sales and starts looking at it between demand capture, demand creation and demand conversion, that's when the magic happens because sale by multiple functions have accountability to multiple parts of that thing, um, and a well functioning revenue team, sales and marketing should be working together on each of those three major categories.
[00:46:42] And so the, the part, the way departmental level budgets are set. And when the companies look at things between marketing and sales and serial, as opposed to an entire revenue budget to drive an entire revenue number, um, I think that with the unlock of looking at it differently between demand capture, demand creation, and demand conversion actually gives RevOps the view that they need to start making some of these changes to one, start seeing the insights, then be able to categorize the insights and take action against them.
[00:47:11] Toni: Wonderful. It's always so great to talk with people who really, you know, have that business mindset when looking at how do you grow a SaaS company, especially now the times we're in, you know, tough times and looking to create a plan for next year. Um, so I think, Chris, thank you so much. I think this was, uh, was really great.
[00:47:29] Uh, thanks for joining and, uh, hoping our paths will cross again soon.
[00:47:33] Chris: Maybe one more point to drop
[00:47:35] before we go. Maybe we're at time to go. Um, I've, I've been talking about, uh, lowering B2B companies, lowering customer acquisition, customer acquisition costs using this method since 2017. And I was being very loud about it in 2020 and 2021. And so the point here is that I've been talking about this stuff for a very long time.
[00:47:58] And I think that people really need to look. At customer acquisition costs differently, which is that instead of looking at it, Oh, our CAC was 24, 000 to look at it and say, if we lowered CAC by 30%, we would get the, we would get 30% more customers with the same amount of money.
[00:48:14] And so, and, and like that is a principle that applies to business regardless of the macroeconomic situation.
[00:48:20] Your goal as a company is to get more good fit customers for less money. And, and when you're able to get more good fit customers with less money, And you're able to get that to a level of efficiency and then you grow and scale with it You create incredible unit economics and a flywheel that will continue to grow with you You just can't you can't scale a bad model Um, and I think that a lot of companies are stuck trying to continue to scale a bad model Which leads to further inefficiencies, so
[00:48:47] Toni: you go.
[00:48:48] Chris: i'm really really appreciate you having me on and uh, thanks for everything
[00:48:52] Toni: Chris, this was fun. Thank you. Thanks for joining.